US Treasury I-series savings bonds – still zero real yield

For the 6th straight 6-month period in a row, US Treasury I-Bonds will be issued with a fixed “real” rate of 0%. That’s zero. Nil. Nada. Zip.

The nominal yield is higher, since it’s a composite built out of the fixed (zero) rate plus a component representing inflation. The composite rate right now is 1.18%.

Sadly, that 1.18% may still be a better deal than anything else out there with similar security and liquidity. You may not cash out an I-bond until after 1 year, and for the first 5 years, if you cash it out, you lose 3 months of interest. So if you buy one and hold for a year (and the composite rate stays where it is — it’ll go up if inflation heats up), you get 0.882%. If you hold it two years, even after giving up the 3 months, you end up with over 1%.

You’ll be hard pressed to find CDs yielding any better. Typical rates from an online bank right now put CDs between 0.3% for a 3 month CD up to about 1.5% for a 5 year CD.